Monitoring Report on the IESO-Administered Electricity Markets

347 Pages·2009·3.94 MB·English

Ontario Energy Board Commission de l’énergie de l’Ontario

Market Surveillance Panel

Monitoring Report on 

the  

IESO‐Administered 

Electricity 

Markets 

for the period from

May 2008 – October 2008

January 2009
Market Surveillance Panel Report
May 2008-October 2008

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Market Surveillance Panel Report
May 2008-October 2008

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Market Surveillance Panel Report
May 2008-October 2008
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Market Surveillance Panel Report
May 2008-October 2008
Table of Contents

Executive Summary ....................................................................................................................................................... i 
Chapter 1: Market Outcomes May 2008 – October 2008 ............................................................................................ 1 
1.  Highlights of Market Indicators .......................................................................................................................... 1 
1.1  Pricing ......................................................................................................................................................... 1 
1.2  Demand ....................................................................................................................................................... 3 
1.3  Supply ......................................................................................................................................................... 3 
1.4  Imports and Exports .................................................................................................................................... 4 
2.  Pricing ................................................................................................................................................................. 5 
2.1  Ontario Energy Price .................................................................................................................................. 5 
2.1.1  Load-weighted HOEP .......................................................................................................................... 7 
2.1.2  Impact of the Global Adjustment and the OPG Rebate on the Effective Price .................................... 8 
2.2  Price Setters .............................................................................................................................................. 10 
2.2.1  Real-time Price Setters....................................................................................................................... 10 
2.2.2  Pre-dispatch Price Setters .................................................................................................................. 12 
2.3  One-Hour and Three-Hour Ahead Pre-dispatch Prices and HOEP ........................................................... 13 
2.3.1  One-hour Ahead Pre-dispatch Price ................................................................................................... 13 
2.3.2  Three-hour Ahead Pre-dispatch Price ................................................................................................ 14 
2.3.3  Reasons for Differences ..................................................................................................................... 16 
2.3.3.1  Demand Forecast Error.............................................................................................................. 17 
2.3.3.2  Performance of Self-Scheduling and Intermittent Generation ................................................... 20 
2.3.3.3  Real-Time Failed Intertie Transactions ..................................................................................... 24 
2.3.3.4  Imports or Exports Setting Pre-dispatch Price ........................................................................... 31 
2.4  Analyzing Year-Over-Year Changes in the HOEP ................................................................................... 32 
2.5  Hourly Uplift and Components ................................................................................................................. 35 
2.6  Internal Zonal Prices and CMSC Payments .............................................................................................. 37 
2.7  A Comparison of HOEP and Richview Nodal Price ................................................................................ 42 
2.8  Operating Reserve Prices .......................................................................................................................... 43 
3.  Demand ............................................................................................................................................................. 47 
3.1  Aggregate Consumption ........................................................................................................................... 47 
3.2  Wholesale and LDC Consumption ........................................................................................................... 48 
4.  Supply ............................................................................................................................................................... 50 
4.1  New Generating Facilities ........................................................................................................................ 50 
4.2  The Supply Cushion ................................................................................................................................. 51 
4.3  Average Supply Curves ............................................................................................................................ 53 
4.4  Outages ..................................................................................................................................................... 55 
4.4.1  Planned Outages ................................................................................................................................ 55 
4.4.2  Forced Outages .................................................................................................................................. 56 
4.5  Changes in Fuel Prices .............................................................................................................................. 58 
4.5.1  Coal Prices ......................................................................................................................................... 58 
4.5.2  Natural Gas Prices ............................................................................................................................. 60 
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Market Surveillance Panel Report
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4.5.3  Heat Rate ........................................................................................................................................... 62 
4.6  Net Revenue Analysis ............................................................................................................................... 64 
5.  Imports and Exports .......................................................................................................................................... 65 
5.1  Overview .................................................................................................................................................. 65 
5.2  Congestion ................................................................................................................................................ 68 
5.2.1  Import Congestion ............................................................................................................................. 69 
5.2.2  Export Congestion ............................................................................................................................. 70 
5.2.3  Congestion Rent................................................................................................................................. 72 
5.3  Analysis of the Determinants of Exports from Ontario to New York ...................................................... 78 
5.4  Wholesale Electricity Prices in Neighbouring Markets ............................................................................ 81 
5.4.1  Price Comparisons ............................................................................................................................. 81 
Chapter 2: Analysis of Market Outcomes ................................................................................................................... 85 
1.  Introduction ....................................................................................................................................................... 85 
2.  Anomalous HOEP ............................................................................................................................................. 87 
2.1  Analysis of High Price Hours ................................................................................................................... 87 
2.1.1  June 2, 2008 HE 21 ............................................................................................................................ 88 
2.1.2  June 9, 2008 HE 11 and 13 ...............................................................................................................101 
2.1.3  June 20, 2008 HE 17 .........................................................................................................................107 
2.1.4  July 8, 2008 HE 10 ...........................................................................................................................111 
2.1.5  July 16, 2008 HE 16 .........................................................................................................................116 
2.1.6  July 19, 2008 HE 10 .........................................................................................................................120 
2.1.7  August 5, 2008 HE 10 ......................................................................................................................123 
2.1.8  August 24, 2008 HE 14.....................................................................................................................128 
2.1.9  September 2, 2008 HE 17 .................................................................................................................133 
2.1.10  September 14, 2008 HE 11 to 13 and HE 19 ....................................................................................136 
2.1.11  October 8, 2008 HE 17 .....................................................................................................................143 
2.1.12  October 24, 2008, HE19 ...................................................................................................................149 
2.1.13  October 27, 2008, HE 8 ....................................................................................................................154 
2.2  Analysis of Low Price hours ................................................................................................................... 158 
2.2.1  Negative Prices .................................................................................................................................160 
2.2.2  July 6, 2008 HE 1 to 7 ......................................................................................................................161 
3.  Anomalous Uplift .............................................................................................................................................171 
3.1  Hours with CMSC greater than $500,000 ............................................................................................... 172 
3.1.1  June 9, 2008, HE 13 ..........................................................................................................................172 
3.1.2  September 14, 2008, HE 19 ..............................................................................................................173 
3.2  Days with total CMSC greater than $1,000,000 on an intertie ............................................................... 173 
3.2.1  June 21, 2008, on the Minnesota interface........................................................................................173 
3.2.2  June 22, 2008, on the Minnesota interface........................................................................................175 
Chapter 3: Matters to Report in the Ontario Electricity Marketplace .......................................................................185 
1.  Introduction ......................................................................................................................................................185 
2.  Changes to the Marketplace since the Panel’s Last Report ..............................................................................186 
2.1  Increased Import Failure on the Michigan Interface ............................................................................... 186 
2.1.1  Assessment .......................................................................................................................................189 
2.2  CAOR Schedules in the Pre-dispatch ..................................................................................................... 191 
2.3  Linked Wheeling through Ontario .......................................................................................................... 193 
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3.  New Matters .....................................................................................................................................................197 
3.1 OPA’s Demand Response Program Phase 3 ................................................................................................... 197 
3.1.1  Introduction ......................................................................................................................................197 
3.1.2  Key elements of DR 3 Program ........................................................................................................198 
3.1.3  Payments under the DR3 Program ....................................................................................................202 
3.1.4  Program Activation ...........................................................................................................................203 
3.1.5  IESO’ Supply Cushion .....................................................................................................................205 
3.1.6  Efficiency Assessment ......................................................................................................................207 
3.1.7  Conclusions ......................................................................................................................................212 
3.2  Self-Induced CMSC Payments made to Generators Shutting Down ...................................................... 213 
3.3  The Day-Ahead Commitment Process.................................................................................................... 217 
3.4  Diminishing Operating Reserve Offered by Fossil-Fired Generators ..................................................... 221 
3.5  A Market Participant’s Response to Environmental Issues .................................................................... 226 
3.5.1  Introduction ......................................................................................................................................226 
3.5.2  Background .......................................................................................................................................227 
3.5.3  Estimated Price Impact .....................................................................................................................229 
3.5.4  Efficiency Impact ..............................................................................................................................232 
3.5.5  Conclusion ........................................................................................................................................233 
3.6  Minister’s Directive Regarding the Reduction of CO2 Emissions ......................................................... 235 
3.6.1  Introduction ......................................................................................................................................235 
3.6.2  The Plan ............................................................................................................................................236 
3.6.3  Assessment .......................................................................................................................................237 
Chapter 4: The State of the IESO-Administered Markets ........................................................................................247 
1.  General Assessment .........................................................................................................................................247 
2.  Accounting for Environmental Constraints within Markets .............................................................................249 
3.  Implementation of Previous Panel Recommendations .....................................................................................256 
4.  Summary of Recommendations .......................................................................................................................259 
4.1  Price Fidelity ........................................................................................................................................... 260 
4.2  Dispatch .................................................................................................................................................. 261 
4.3  Hourly Uplift Payments .......................................................................................................................... 263 
List of Tables ......................................................................................................................................................... 4.3-1 

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Market Surveillance Panel Report
May 2008-October 2008
List of Tables
Table 1-1: Average HOEP, On-peak and Off-peak, May – October 2007 & 2008 ...................................... 6
Table 1-2: Load-Weighted Average HOEP and Dispatchable Load Operating Reserve Revenue, ...............
November – April 2006/2007 & 2007/2008 ........................................................................................ 8
Table 1-3: Impact of Adjustments on Weighted HOEP, May – October 2007 & 2008 .............................. 10
Table 1-4: Average Share of Real-time MCP set by Resource Type, May – October 2007 & 2008 ........... 10
Table 1-5: Monthly Share of Real-Time MCP set by Resource Type, May – October 2007 & 2008 ......... 11
(% of Intervals) ................................................................................................................................... 11
Table 1-6: Monthly Share of Real-Time MCP set by Resource Type, On-Peak, May – ................................
October 2007 & 2008 ......................................................................................................................... 12
Table 1-7: Monthly Share of Real-Time MCP set by Resource Type, Off-Peak, May – ...............................
October 2007 & 2008 ......................................................................................................................... 12
Table 1-8: Monthly Share of Pre-dispatch Price set by Resource Type, May – .............................................
October 2007 & 2008 ......................................................................................................................... 13
Table 1-9: Measures of Differences between One-Hour Ahead Pre-Dispatch Prices and HOEP, .................
May – October 2007 & 2008 ............................................................................................................. 14
Table 1-10: Measures of Differences between Three-Hour Ahead Pre-Dispatch Prices and HOEP, ............
May – October 2007 & 2008 ............................................................................................................. 15
Table 1-11: Average and Absolute Average Hourly Error by Discrepancy Factor, May – October 2008 . 17
Table 1-12: Demand Forecast Error, May – October 2007 & 2008............................................................ 18
Table 1-13: Frequency and Average Magnitude of Failed Exports from Ontario, May – .............................
October 2007 & 2008 ......................................................................................................................... 26
Table 1-14: Frequency and Average Magnitude of Failed Imports to Ontario, May – October ....................
2007 & 2008 ...................................................................................................................................... 27
Table 1-15: Average Monthly Export Failures by Intertie Group and Cause, May – October 2008 .......... 30
Table 1-16: Average Monthly Import Failures by Intertie Group and Cause, May – October 2008 .......... 31
Table 1-17: Frequency of Imports or Exports Setting the Pre-Dispatch Price, May – ............... October 2007
& 2008 ............................................................................................................................................... 32
Table 1-18: Estimation Results of the Updated Econometric Model, January 2003 - October 2008 ......... 33
Table 1-19: Price Effect of Setting 2008 Factors Equal to 2007 Factors ..........................................................
All hours, On-peak hours and Off-peak hours January 2003 to October 2008 ............................................. 34
Table 1-20: Monthly Total Hourly Uplift Charge by Component and Month, May – ...................................
October 2007 & 2008 ......................................................................................................................... 36
Table 1-21: Internal Zonal Prices, May 2007 – October 2008 .................................................................... 38
Table 1-22: Total CMSC Payments by Internal Zone, May – October 2007 & 2008................................. 42
Table 1-23: HOEP and Richview Price Summary Statistics, May – October 2007 & 2008 ....................... 43
Table 1-24: Operating Reserve Prices On-Peak, May – October 2007 & 2008 .......................................... 45
Table 1-25: Operating Reserve Prices Off-Peak, May – October 2007 & 2008 ......................................... 45
Table 1-26: Monthly Energy Demand, Market Schedule, May – October 2007 & 2008 ............................ 48
Table 1-27: Pre-Dispatch Total Supply Cushion, May – October 2007 & 2008 ........................................ 52
Table 1-28: Real-time Domestic Supply Cushion, May – October 2007 & 2008 ...................................... 52
Table 1-29: Average Hourly Market Schedules by Baseload Generation Type and Ontario Demand, May –
October 2007 & 2008(GW) ................................................................................................................. 55
Table 1-30: Average Monthly Coal Prices by Type, May – October 2007 & 2008 .................................... 59
Table 1-31: Average Monthly Natural Gas Prices by Type, May – October 2007 & 2008 ......................... 61
Table 1-32: Yearly Estimated Net Revenue Analysis for Two Generator Types, .........................................
November 2003 – October 2008 ........................................................................................................ 65
Table 1-33: Net Exports (Imports) from Ontario On-peak and Off-peak, May – October 2007 & 2008 ... 66
Table 1-34: Net Exports (Imports) from Ontario by Neighbouring Intertie Group ........................................
May – October 2007 & 2008 ............................................................................................................. 68
Table 1-35: Import Congestion in the Market Schedule by Intertie, May – October 2007 & 2008 ............. 70
Table 1-36: Export Congestion in the Market Schedule by Intertie, May – October 2007 & 2008 .................
(Number of Hours) .............................................................................................................................. 71
Table 1-37: Import Congestion Rent by Intertie, May – October 2007 & 2008 .......................................... 73
Table 1-38: Export Congestion Rent by Intertie, May – October 2007 & 2008 .......................................... 73
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Table 1-39: Average Congestion Rents per hour of Congestion by Intertie May – ........................................
October 2007 & 2008 ......................................................................................................................... 75
Table 1-40: Monthly Import Transmission Rights Payouts by Intertie, May – October 2007 & 2008 ........ 76
Table 1-41: Monthly Export Transmission Rights Payouts by Intertie, May – October 2007 & 2008 ........ 76
Table 1-42: Monthly Average Import Congested Prices by Intertie, May – October 2007 & 2008 ............. 77
Table 1-43: Monthly Average Export Congested Prices by Intertie, May – October 2007 & 2008 ............. 77
Table 1-44: Monthly Export TR Payouts less Congestion Rents by Intertie, May – October 2007 & 2008 78
Table 1-45: New York Export Model Estimation Results, January 2003 – October 2008 .......................... 79
Table 1-46: Michigan Export Model Estimation Results, January 2003 – October 2008 ............................ 80
Table 1-47: Average HOEP Relative to Neighbouring Market Prices, May – October 2007 & 2008 ....... 81
Table 2-1: Number of Hours with a High HOEP May – October, 2007 and 2008 ...................................... 87
Table 2-2: MCP, Ontario Demand and Net Exports, Real-Time and final Pre-dispatch ..................................
June 2, 2008, HE 20 and 21 .......................................................................................................................... 89
Table 2-3: Pre-Dispatch Prices, Ontario Demand and Exports/Imports for Selected Hours Ahead, ................
June 2, 2008, HE 21 ...................................................................................................................................... 90
Table 2-4: Schedules that are used for MCP Calculation and for Settlement ...................................................
June 2, 2008 HE 20 and 21 ........................................................................................................................... 95
Table 2-6: MCP, Ontario Demand and Net Exports, Real-Time and Final Pre-dispatch .................................
June 9, 2008 HE 10-13 ............................................................................................................................... 102
Table2-7: Day-Ahead Conditions June 9, 2008 HE10-13 .......................................................................... 103
Table 2-8: Pre-dispatch MCP, Demand and Net Exports June 9, 2008, HE 11 and 13 .............................. 104
Table 2-9: MCP, Ontario Demand and Net Exports, Real-time and Final Pre-dispatch ...................................
June 20, 2008, HE17 and 18 ....................................................................................................................... 108
Table 2-10: Pre-Dispatch Prices, Ontario Demand and Exports/imports for Selected Hours Ahead ...............
June 20, 2008, HE 17 .................................................................................................................................. 109
Table 2-11: MCP, Ontario Demand and Net Exports, Real-time and Final Pre-dispatch July 8, ....................
2008 HE10 and 11 ........................................................................................................................... 112
Table 2-12: Pre-Dispatch Prices, Ontario Demand and Exports/Imports in Selected Hours Ahead .................
July 8, 2008, HE 10 .................................................................................................................................... 113
Table 2-13: “Actual” and Simulated MCP, Actual OR Requirements and the Schedules of the .....................
Nuclear Unit, July 8, 2008, HE 10 ................................................................................................... 115
Table 2-14: The Nuclear Unit’s Actual Output, Constrained and Unconstrained Schedules ...........................
July 8, 2008 HE10(MW) .................................................................................................................. 116
Table 2-15: MCP, Ontario Demand and Net Exports, Real-time and Final Pre-dispatch .................................
July 16, 2008 HE 16 and 17 .............................................................................................................. 117
Table 2-16: Pre-Dispatch Prices, Ontario Demand and Exports/Imports for Selected Hours Ahead ...............
July 16, 2008, HE 16 ......................................................................................................................... 118
Table 2-17: MCP, Ontario Demand and Net Exports, Real-time and Final Pre-dispatch .................................
July 19, 2008, HE 10 and 11 ............................................................................................................. 121
Table 2-18: Pre-Dispatch Prices, Ontario Demand and Exports/Imports for Selected Hours Ahead ...............
July 19, 2008, HE 10 ......................................................................................................................... 122
Table 2-19: MCP, Ontario Demand and Net Exports, Real-time and Final Pre-dispatch .................................
August 5, 2008 HE 10 and 11 ........................................................................................................... 124
Table 2-20: PD Price, Ontario Demand and Exports/imports, August 5, 2008, HE 10 .............................. 125
Table 2-21: Shared Activation Reserves (SAR) Statistics January 2007 to August 20, 2008 .................... 128
Table 2-22: MCP, Ontario Demand and Net Exports, Real-time and Final Pre-dispatch .................................
August 24, 2008 HE 13 and 14 ......................................................................................................... 129
Table 2-23: PD Price, Ontario Demand and Exports/imports, August 24, 2008, HE 14 ............................ 131
Table 2-24: Actual and Simulated One-hour ahead Pre-dispatch Results ........................................................
August 24, 2008 HE 14 ..................................................................................................................... 132
Table 2-25: MCP, Ontario Demand and Net Exports, Real-time and Final Pre-dispatch .................................
September 2, 2008 HE 17 ................................................................................................................. 133
Table 2-26: Pre-Dispatch Prices, Ontario Demand and Exports/Imports for Selected Hours Ahead ...............
September 2, 2008, HE 17 ................................................................................................................ 134
Table 2-27: Comparison of “Actual”* and Simulated Results September 2, 2008 HE17 .......................... 136
Table 2-28: MCP, Ontario Demand and Net Exports, Real-time and Final Pre-dispatch .................................
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September 14, 2008, HE 10 to 14 and HE 18 to 20 .......................................................................... 137
Table 2-29: Day-ahead Price, Demand, and Supply Cushion ...........................................................................
September 14, 2008 HE 11, 12, 13 and 19 ........................................................................................ 138
Table 2-30: Pre-dispatch Prices, Ontario Demand and Net Exports for Selected Hours Ahead .......................
September 14, 2008, HE 11, 12, 13 and 19 ....................................................................................... 138
Table 2-31: “Actual”* and Simulated MCP September 14, 2008, HE 19 and 20 ....................................... 143
Table 2-32: MCP, Ontario Demand and Net Exports, Real-time and Final Pre-dispatch .................................
October 8, 2008 HE 16 to 18 ............................................................................................................. 144
Table 2-33: PD Price, Ontario Demand and Exports/imports October 8, 2008, HE 17 .............................. 145
Table 2-34: Failed Imports on the Quebec and Michigan Interfaces October 8, 2008, HE 18 ................... 148
Table 2-35: MCP, Ontario Demand and Net Exports, Real-time and Final Pre-dispatch .................................
October 24, 2008 HE 18 and 19 ........................................................................................................ 150
Table 2-36: PD Price, Ontario Demand and Exports/imports October 24, 2008, HE 19 ............................ 152
Table 2-37: MCP, Ontario Demand and Net Exports, Real-time and Final Pre-dispatch .................................
October 27, 2008 HE 8 and 9 ............................................................................................................ 155
Table 2-38: PD Price, Ontario Demand and Exports/imports October 27, 2008, HE 8 .............................. 156
Table 2-39: Number of Hours with a Low HOEP May - October, 2004 – 2008 ........................................ 158
Table 2-40: Average Monthly Summary Data for Low-priced Hours May - October 2008 ....................... 160
Table 2-41: Number of Hours with a Negative HOEP May - October, 2004 – 2008 ................................. 160
Table 2-42: Average Monthly Summary Data for Negative-priced Hours May - October 2008* .............. 161
Table 2-43: MCP, Ontario Demand and Net Exports, Real-time and Final Pre-dispatch .................................
July 6, 2008, HE 1 to 7 ...................................................................................................................... 162
Table 2-44: Day-Ahead Prices, Demand and Supply Cushions .................................................................. 162
July 6, 2008, HE 1 to 7 ...................................................................................................................... 162
Table 2-45: Pre-dispatch Prices, July 6, 2008, HE 1 - 7 ............................................................................. 163
Table 2-46: Constrained off Generation for EBG, and Constrained on Imports and Constrained –off ..........
Exports in Pre-dispatch, July 6, 2008 ............................................................................................... 164
Table 2-47: Real-time and Pre-dispatch Demand July 6, 2008, HE 1 to 7 ................................................. 165
Table 2-48: Real-time Prices in Ontario and External Markets, July 6, 2008, HE 1 to 7 ........................... 166
Table 2-49: Self-scheduling and Intermittent Generation Deviation July 6, 2008, HE 1 to 7 .................... 167
Table 2-50: Impact of EBG Control Actions in Pre-dispatch, October 13, 2008 ....................................... 170
Table 2-51: PD Prices and CMSC Payment to Importers and Exporters ..........................................................
on the Minnesota Interface, June 21, 2008 ........................................................................................ 175
Table 3-1: Comparison of Real-Time Intertie Transaction Dispatch among Selected................................ 190
Table 3-2: Hours of Availability of DR3 .................................................................................................... 200
Table 3-3: Trigger Supply Cushion since the Implementation of DR3, for both the current ...........................
day and the day ahead, August – October 2008 ............................................................................... 201
Table 3-4: Rate Scheme under DR3 ........................................................................................................... 203
Table 3-5: DR3 Activations, Market Prices, and Payment per Activation .......................................................
August 1 to October 31, 2008 ........................................................................................................... 204
Table 3-6: Ranks of the Peak Demand and HOEP of Each Activation within Specific Period .................. 205
Table 3-7: Cost-Benefit Analysis for a Marginal and Average Resource, 2007 ......................................... 210
Table 3-8: Comparison of a Peaking CTU Generator and DR3 Program, 2007 ......................................... 211
Table 3-9 Monthly Constrained-on Payments by Fuel Type Resulting from Shutdown, .................................
(December 2006 to November 2008) ................................................................................................ 215
Table 3-10: DA-GCG on Weekdays and Weekends, ($ million) June 2006 to October 2008 ................... 219
Table 3-11: Simulated Monthly Price Levels with and without the Negative Adder at Facility A ..................
November 2007 – October 2008($/MWh) ........................................................................................ 231
Table 4-1: Number of Hours with HOEP < $20/MWh May-October, 2002-2008 ..................................... 248
Table 4-2: Summary of IESO Responses to Recommendations ................................................................ 257

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